Caterpillar has today reported a 46% annual drop in first-quarter earnings, with sales falling across all regions and all of its primary business segments, highlighting the economic devastation caused by the coronavirus pandemic.
The world's biggest construction and mining equipment maker reported an adjusted profit of $1.60 per share, down from $2.94 a year earlier and below the $1.69 forecast by analysts on average, Refinitiv Eikon data showed.
It did not provide a 2020 financial outlook, citing the pandemic.
The Deerfield, Illinois-based company, considered a bellwether for economic activity, warned the impact of the virus on its business would be far worse in the second quarter.
It anticipates dealers will reduce their inventories by as much as $1.5 billion this year in response to depressed equipment demand.
As governments across the globe try to stop the spread of the virus through lockdowns, economic activity has come to sudden halt.
The International Monetary Fund this month predicted the "Great Lockdown" would result in the worst global recession since the Great Depression of the 1930s.
This is taking a heavy toll on commodities, especially oil prices.
Since the start of the year, Brent has fallen about 72%, while WTI has dropped about 82% to levels well below break-even costs necessary for many shale drillers. In response, companies have halted drilling and drastically cut spending.
It is a bad news for industrials like Caterpillar which sell mining and oil and gas machines.
Sales at its energy and transportation and mining business, which accounts for 60% of the company's revenues, fell 19% during the quarter from a year ago.
Construction equipment sales declined an annual 27%.
As of mid-April, the company said about 75% of its primary production facilities were in operation. It said some facilities which were temporarily closed had reopened.
However, its chief financial officer Andrew Bonfield said the capacity utilisation rate is lower in comparison to the period before the coronavirus outbreak.
The company said it is aligning production with expected demand and is prioritizing investment in its more profitable and resilient services and parts business.
In response to weak demand, it has cut discretionary spending and withheld annual salary increases and bolstered its liquidity position.
Caterpillar said its enterprise operating cash flow was $1.130 billion. It ended the first quarter with $7.1 billion in cash and has $20.5 billion of liquidity pool to tap into.
